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1 Pg 1 of 10 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re: SOUND SHORE MEDICAL CENTER OF WESTCHESTER, et al., 1 Debtors x Chapter 11 Case Case No (RDD) (Jointly Administered) ORDER (I) APPROVING MANDATORY CLAIMS RESOLUTION PROCESS TO RESOLVE CERTAIN MEDICAL MALPRACTICE AND RELATED INDEMNIFICATION CLAIMS AGAINST THE DEBTORS AND (II) ENJOINING ANY MEDICAL MALPRACTICE ACTION AGAINST CERTAIN OF THE DEBTORS MEDICAL PROFESSIONALS Upon the motion (the Motion ) 2 of Sound Shore Medical Center ( Sound Shore ), The Mount Vernon Hospital ( Mount Vernon ), and the other above-captioned debtors and debtorsin-possession (collectively the Debtors ), for an order, pursuant to section 105(a) of the Bankruptcy Code and Local Bankruptcy Rule , (i) approving a mandatory claims resolution process (the Claims Resolution Process ) 3 to resolve (a) certain claims against any of the Debtors on account of or related to such Debtors purported liability resulting from the provision of medical services, including personal injury or wrongful death claims (each, a Medical Malpractice Claim and, collectively, Medical Malpractice Claims ), and (b) related indemnification claims filed by Medical Professionals, some of whom may be defendants in prepetition medical malpractice actions, and (ii) enjoining the holders of Medical Malpractice 1 The debtors in these chapter 11 cases, along with the last four digits of each debtor s federal tax identification number include: Sound Shore Health System, Inc. (1398), Sound Shore Medical Center of Westchester (0117), The Mount Vernon Hospital, Inc. (0115), Howe Avenue Nursing Home d/b/a Helen and Michael Schaffer Extended Care Center (0781), NRHMC Services Corporation (9137), The M.V.H. Corporation (1514) and New Rochelle Sound Shore Housing, LLC (0117). There are certain additional affiliates of the Debtors who are not debtors and have not sought relief under Chapter All capitalized undefined terms used in this Order shall have the meanings ascribed to them in the Motion. 3 The Debtors reserve the right to seek the Court s authorization to amend or modify the terms of the Claims Resolution Process.

2 Pg 2 of 10 Claims (the Medical Malpractice Claimants ) from prosecuting any action related to the Medical Malpractice Claims against the Debtors current or former Medical Professionals until confirmation of a chapter 11 plan of liquidation for the Debtors (a Plan ), all as more fully set forth in the Motion; and the Court having core jurisdiction to consider the Motion and relief requested therein pursuant to 28 U.S.C. 157(b) and 1334(b); and it appearing that notice of the Motion was adequate and proper, including on all known Medical Malpractice Claimants and applicable insurers; and upon the objection to the Motion; and upon the record of the hearing held by the Court on the Motion on October 10, 2013, at which time the objection to the Motion was withdrawn; and the Court having determined that the relief requested in the Motion and granted herein is in the best interests of the Debtors, their estates, creditors and all parties-ininterest in these Chapter 11 cases, including the Medical Malpractice Claimants; and it appearing that no other or further notice need be given except as provided herein; and after due deliberation and sufficient cause therefor, it is hereby ORDERED, that the Motion is granted as provided herein; and it is further ORDERED, that the Claims Resolution Process, as modified by the terms of this Order, is approved; and it is further ORDERED, that all Medical Malpractice Claimants who hold timely-filed Medical Malpractice Claims, and/or are served with a Mediation Notice, are hereby referred to mediation (the Mediation ), and no Medical Malpractice Claimant shall be allowed to continue any action with respect to, or seek a recovery on account of, any Medical Malpractice Claim against the Debtors, the Medical Professionals, or any of the Debtors assets, unless they have first complied, in good faith, with the Claims Resolution Process as approved hereby; and it is further 2

3 Pg 3 of 10 ORDERED, that a mediator or mediators (the Mediator ) shall be selected by the Debtors, after consultation the Committee, who shall serve for an initial term of six (6) months from the date he or she is selected, subject to extension upon further order of the Court; and it is further ORDERED, that the Debtors are authorized to retain and compensate each Mediator without further order of the Court; and it is further ORDERED, that as soon as practicable after the appointment of a Mediator, he or she shall confer with representatives of the Debtors and the applicable Medical Malpractice Claimant to discuss procedural issues applicable to the mediation process, and the Mediator shall have the duty and authority to establish the time for all mediation activities, including the mediation session or sessions with respect to each particular claim (the Mediation Sessions ) and the submission and exchange of relevant documents; and it is further ORDERED, that the Mediator, with the advice of the Debtors, shall select the order in which Medical Malpractice Claims will be presented to the Mediator, including the date, time and location of each Mediation Session, and that, in all cases, the Mediator shall have sole authority to establish reasonable and practical Mediation procedures; provided, however, that nothing in this Mediation process shall preclude the Debtors from attempting to resolve a Medical Malpractice Claim without having the Medical Malpractice Claimant attend a Mediation Session (including, without limitation, by offering to make a Settlement Payment (as defined below)); and it is further ORDERED, that at the direction of the Mediator, the Debtors shall serve notice of the date, time and location of the individual Mediation Sessions (the Mediation Notice ) upon counsel to the respective Medical Malpractice Claimants, and, if counsel is not known, upon the 3

4 Pg 4 of 10 Medical Malpractice Claimant at the address listed on the proof of claim filed by the Medical Malpractice Claimant against the Debtors; and the Mediation Notice also shall contain the procedures applicable to the individual Mediation Sessions, including the time for submission of any documents or statements by the parties; and it is further ORDERED, that no party in interest shall be allowed to conduct any discovery related to a Medical Malpractice Claim prior to the initial Mediation Session, and any discovery allowed after the initial Mediation Session shall be determined by the Mediator in his or her sole discretion; and it is further ORDERED, that any party may be represented by legal counsel at its own cost and expense, although the participation of legal counsel shall not be required for the conduct of the Mediation; and it is further ORDERED, that the Mediator shall meet with the parties or their representatives, individually and jointly, for a conference or series of conferences as determined by the Mediator, subject to the following conditions: 1. The Medical Malpractice Claimant and the Debtors or their respective representatives with requisite authority must be present at the conferences; 2. Each representative must have the complete authority to negotiate all disputed amounts and issues associated with a given Medical Malpractice Claim; 3. With respect to any Medical Malpractice Claim for which there is third party insurance coverage, either a representative of the insurance carrier or such other person with authority to settle on behalf of the insurance carrier must be present at the conferences; 4. The Debtors shall request, and may require, the participation of any Medical Professional named in the underlying prepetition medical malpractice action; 5. The Mediator shall report any willful failure to attend or participate in good faith in the Mediation Sessions to the Court. Such failure may result in the imposition of sanctions by the Court, including the disallowance or allowance, as the case may be of the Claim; and 4

5 Pg 5 of The Mediator shall have the authority to establish a deadline for the Medical Malpractice Claimants to act upon a proposed settlement or upon a settlement recommendation from the Mediator; and it is further ORDERED, that settlement of any prepetition Medical Malpractice Claim reached pursuant to the Mediation (other than by a Settlement Payment or by payment of insurance proceeds) shall be treated as an allowed unsecured non-priority claim, and the holder thereof shall receive a pro rata distribution on account of such claim pursuant to a Plan, or as otherwise provided in a Plan or the Bankruptcy Code, and that the following procedures shall apply to all such settlements (although the Debtors reserve the right to seek to revise such procedures): 1. The Mediator shall have no obligation to make written comments or recommendations; provided, however, that the Mediator may furnish the parties with a written or oral settlement recommendation, which shall not be filed with the Court; 2. If the parties reach an agreement regarding the disposition of the matter, the Debtors shall give ten (10) days prior written notice of the settlement to the Committee and the U.S. Trustee (together, the Notice Parties ). In the event a Notice Party opposes the settlement, it shall promptly (within such ten (10) day period) so advise the Debtors and the other Notice Party in writing, after which the Debtors and the opposing Notice Party shall attempt to resolve the opposition, and if such opposition cannot be resolved, the Debtors may submit to the Court a stipulated order or motion to approve the settlement (as appropriate, in the Debtors discretion) on ten (10) days notice to the Notice Parties. In the event no Notice Party opposes the settlement within the original ten (10) day notice period, the Debtors may submit to the Court a stipulated order approving the settlement without further notice; 3. Any stipulated order or order approving the settlement motion, as applicable, shall contain, among other things, appropriate releases by the Medical Malpractice Claimant against the Debtors estates and to the extent relevant, the Medical Professionals; and 4. Absent such a stipulated order or order approving the settlement motion, no party shall be bound by any statement made or action taken during the Mediation; and it is further 5

6 Pg 6 of 10 apply: ORDERED, that with regard to confidentiality in the Mediation, the following shall 1. Any statements made by the Mediator, the Medical Malpractice Claimants, the Debtors, their respective representatives, or by any others during the Mediation process shall not be divulged by any of the participants in the Mediation (or their representatives) or by the Mediator to the Court or to any third party; that is, as strict mediation privilege shall apply, subject to subparagraph 5 of the next preceding decretal paragraph herein before the immediately preceding decretal paragraph herein; 2. All records, reports, or other documents received or made by the Mediator while serving in such capacity shall be confidential and shall not be provided to any court, unless they would be otherwise admissible at any hearing or trial in connection with any Medical Malpractice Claim; and 3. The Mediator shall not be compelled to divulge such records or to testify in regard to the Mediation in connection with any arbitral, judicial or other proceeding, including any hearing held by the Court or any other court in connection with the Medical Malpractice Claim; and it is further ORDERED, that the Mediator s fees and expenses incurred in connection with each Mediation Session (the Mediation Costs ) shall be borne as follows: (i) the Debtors and each Medical Malpractice Claimant shall each be responsible for fifty percent (50%) of the Mediation Costs for such Medical Malpractice Claimant s Mediation Sessions, provided, however, that the Debtors shall advance 100% of such fees and the Medical Malpractice Claimant s share of the Mediation Costs shall be payable as a reimbursement only from a distribution in the Chapter 11 Cases, except as otherwise set forth herein or by further order of the Court, (ii) each party shall bear its own legal and other professional fees and expenses, and (iii) if either a Medical Malpractice Claimant (or a representative thereof) or a representative of the Debtors fails to appear for any scheduled Mediation Session without giving written notice, to be received at least five (5) days prior to the scheduled Mediation Session, to (a) the Mediator and (b) counsel for the opposing party, if any, the party failing to appear shall be responsible for one hundred percent 6

7 Pg 7 of 10 (100%) of the Mediation Costs for that Mediation Session, including attorneys fees and costs for opposing counsel, if the Mediator or the Debtors are unable to substitute an alternate Mediation Session for the cancelled Mediation Session. If the party cancelling the Mediation Session fewer than five (5) days prior to the Mediation Session is a Medical Malpractice Claimant, the Medical Malpractice Claimant shall be responsible for one hundred percent (100%) of the cost of the cancelled Mediation Session regardless of whether the Medical Malpractice Claimant ultimately receives a distribution in the Chapter 11 Cases, but only in the event that an alternate Mediation Session was unable to be substituted for the cancelled Mediation Session; and it is further ORDERED, that with respect to Medical Malpractice Claims filed after the Bar Date, the Debtors shall have the right to object to such claims as late-filed, to serve a notice (without further order of the Court) on the applicable Medical Malpractice Claimant requiring participation in the Claims Resolution Process, and/or to enter into a Stay Modification Stipulation (as defined below), and, with respect to Medical Malpractice Claims filed after the Bar Date that are deemed timely filed by the Court, the Debtors shall have the right to serve a notice (without further order of the Court) on the applicable Medical Malpractice Claimant requiring participation in the Claims Resolution Process; and it is further ORDERED, that the Debtors rights to require any postpetition Medical Malpractice Claimant to participate in the Claims Resolution Process, and the ability to seek an extension of the automatic stay in connection therewith, are reserved; and it is further ORDERED, that if the Debtors and a particular Medical Malpractice Claimant are unable to liquidate or compromise a Medical Malpractice Claim through good faith efforts in accordance with the Mediation procedures and requirements set forth above, upon (a) a proper application by the Debtors and (b) satisfaction of the requirements of section 502(c) of the 7

8 Pg 8 of 10 Bankruptcy Code for directing an estimation of the Claim, the Medical Malpractice Claim shall be estimated in the District Court, together with any vicarious or other liability the Debtors may have on account of any indemnification claim related to such Medical Malpractice Claim. The holders of allowed Medical Malpractice Claims, whether estimated by the District Court or liquidated through Mediation (other than by a Settlement Payment), shall receive a pro rata distribution from a medical malpractice reserve to be established under a Plan, or as otherwise provided in a Plan or the Bankruptcy Code in full and complete satisfaction of such allowed claims; and it is further ORDERED, that a Medical Malpractice Claimant may opt out of the Mediation process by advising counsel for the Debtors in writing of his or her desire to resolve the Medical Malpractice Claim by entering into and filing with the Court a stipulation with the Debtors, substantially in the form attached to the Motion as Exhibit B (the Stay Modification Stipulation ), which form is hereby approved, modifying the automatic stay for the sole purpose of permitting the Medical Malpractice Claimant to liquidate his or her Medical Malpractice Claim in a forum outside of this Court, but limiting all recovery solely to any available insurance coverage and otherwise waiving all claims against the Debtors and Medical Professionals (the Stay Modification Option ). A Medical Malpractice Claimant also may avoid the Mediation process by withdrawing his or her Medical Malpractice Claim in its entirety or by otherwise reaching a settlement with the Debtors; and it is further ORDERED, that no Medical Malpractice Claimant shall not have the right to modify the terms and conditions of the Stay Modification Stipulation; and it is further ORDERED, that, notwithstanding any other provision of this Order, the Debtors shall have the authority, after consultation with the Committee, in their discretion, to offer any 8

9 Pg 9 of 10 Medical Malpractice Claimant a cash payment of up to $5, in full and final settlement and satisfaction of his or her Medical Malpractice Claim (a Settlement Payment ). A Settlement Payment may be paid by the Debtors without further order of the Court with consent of the Committee; and it is further ORDERED, that as soon as practicable following entry of this Order, the Debtors shall serve each of the Medical Malpractice Claimants (at the addresses of such claimants or their counsel set forth in the proofs of claim filed against the Debtors) with a notice of entry of this Order, substantially in the form attached to the Motion as Exhibit C (the Notice of Entry ), which form is hereby approved; and it is further ORDERED, that the Notice of Entry shall (i) advise each Medical Malpractice Claimant that his or her Medical Malpractice Claim has been referred to Mediation pursuant to the terms of this Order, (ii) indicate that the Medical Malpractice Claimant may opt out of the Mediation process by advising counsel for the Debtors in writing of his or her desire to resolve the Medical Malpractice Claim pursuant to the Stay Modification Option, and (iii) advise each Medical Malpractice Claimant that he or she may avoid the Mediation process by withdrawing his or her Medical Malpractice Claim in its entirety or by otherwise reaching a settlement with the Debtors; and it is further ORDERED, that all Medical Malpractice Claimants are hereby enjoined from commencing or continuing any action relating to their Medical Malpractice Claims against the Medical Professionals until confirmation of a Plan, subject to further order of this Court; and it is further 9

10 Pg 10 of 10 ORDERED, that this Court shall retain jurisdiction over the Debtors and the Medical Malpractice Claimants with respect to any matters related to or arising from the implementation of this Order. Dated: October 25, 2013 White Plains, New York /s/robert D. Drain HON. ROBERT D. DRAIN UNITED STATES BANKRUPTCY JUDGE 10

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